Moody's affirms Mong Duong Finance's Ba3 rating

The firm has also revised Mong Duong Finance’s outlook to 'positive'.

Moody’s Investors Service has affirmed the Mong Duong Finance Holdings BV’s Ba3 USD senior secured notes rating after it has affirmed Vietnam’s Ba3 rating.

"The rating action on Mong Duong Finance reflects our assessment that the notes will benefit from Vietnam's improving credit quality, given the constraint by the sovereign rating," said Mic Kang, Moody's vice president and senior credit officer.

This followed Moody’s rating action affirming Vietnam’s Ba3 ratings as well as outlook revision to positive from negative on 18 March.

The outlook was revised as the credit-rating firm found improvements in the fiscal and economic strength of Vietnam.

Moody’s noted Vietnam’s economy is expected to benefit from global shifts in production, trade and consumption amidst the pandemic.

In line with this, Mong Duong Finance’s outlook was also revised to positive from negative. Mong Duong Finance’s ratings will likely be upgraded if Moody’s upgrade Vietnam’s sovereign rating.

This will also depend on the Vietnam government’s commitment to AES Mong Duong Power Company Limited (MDP), which owns and operated the underlying power project.

"The government's commitment through a guarantee and undertakings will help the underlying power project mitigate risks stemming from its concentration in a single offtaker and a sole coal supplier, thereby allowing the project to continue benefiting from its fully-contracted cash flow," Kang said.

Mong Duong Finance is a finance entity whose credit profile is closely linked to MDP. Its ratings upgrade will also be affected by MDP’s operation and financial leverage as well as sponsor profile.

Further, Moody’s noted its outlook could be changed to stable or take an adverse rating if Vietnam receives a negative sovereign rating and if MDP’s debt service coverage ratio falls below 1.1x during the amortization period. It may also be changed of MDP’s sponsor profile weakens.